DELL TO BUY EMC IN DEAL WORTH ABOUT $67 BILLION

Original Story: cnbc.com

Dell announced a deal Monday with MSD Partners and Silver Lake to buy cloud computing company EMC for roughly $67 billion in cash and stock.

"We're creating an unbelievable powerhouse of an enterprise company," Dell Chairman and CEO Michael Dell told CNBC's "Squawk Box." "This is really all about bringing together complementary technologies and helping our customers address the challenges and opportunities that this digital future is creating." A Houston securities lawyer is experienced in the effective resolution of securities lawsuits as related to stocks, bonds, and debentures.

EMC stockholders will receive about $33.15 per share in cash and a type of stock that is linked to "a portion of EMC's economic interest" in its VMware business, which will remain an independent, publicly traded company, the companies said in a statement Monday.

The transaction marks the largest technology sector deal on record, topping U.S. chipmaker Avago Technologies' $37 billion offer for rival Broadcom. That deal is still in process. A Salt Lake City securities lawyer is following this story closely.

The acquisition of EMC is seen helping Dell diversify from the stagnant personal computer market and give it the scale to attack the faster-growing and more lucrative market for managing and storing data for businesses.

EMC will have a "go-shop" provision that will allow the data storage company to seek out other buyers and give EMC a discounted breakup fee if it finds a more desirable deal, EMC Chairman and CEO Joe Tucci said on "Squawk Box." A Las Vegas contract lawyer is reviewing the details of this story.

"We will do our duty to make sure we get the best deal for our shareholders and time will show," he said.

Eight Companies Ruined By Their Founders

Story first appeared on USA Today -

For every Sergey Brin, there is a Michael Dell. While the Google co-founder and CEO made his company one of the most valuable in the world with its shares trading near an all-time high, Dell has laid waste to his namesake. Dell and financial supporters offered to buy the company for $13.65 a share, 40% lower than what it was worth when Dell returned to the company as CEO in early 2007.

Investors who bought Dell shares a year ago have taken a haircut of more than 20%. Dell's failure is not unique. He belongs to a group of founders of large public companies that showed great promise but were ultimately wrecked by poor decisions, legal problems, and a lack of innovation.

Perhaps the greatest hallmark of founders who ruin their companies is that they appear to look out mostly for No. 1 rather than the interests of the company and its shareholders. For starters, they accept excessive compensation.

Steve Jobs of Apple, earned $1 in salary and bonus in 2010. By contrast, Aubrey McClendon, who was recently ousted as CEO of Chesapeake Energy, made over $100 million in 2008, and remarkably large sums in the years since then. Some of his other actions, such as allegedly borrowing against assets that he co-owned with Chesapeake, raised concerns of conflict of interest.

Martha Stewart recently received a new contract from her company, Martha Stewart Living Omnimedia, which has lost money four years in a row. Under the arrangement, she will continue as founder and chief creative officer at the firm until 2017. That is in addition to the more than $20 million she made over the three years that ended in 2011.

Dov Charney, who drove the company he founded, American Apparel, to the brink of bankruptcy in 2011, made $11.6 million that year. Michael Dell, who in 2010 settled Securities and Exchange Commission charges that he helped misrepresent Dell's financials, made more than $21 million during the company's last three combined fiscal years.

A more complex measurement of these founders' performance is their lack of vision to transform their companies as the markets in which they operate change. None have shown the foresight Brin did when he moved Google beyond search and into mobile operating systems. And his company is also the dominant force in online video.

Dell did not drive any comparable revolution at his company, which never stepped aggressively into the new age of personal computing— tablets and smartphones. The same holds true for Mike Lazaridis, the co-founder of BlackBerry, which did not transform its market share in the corporate smartphone industry into a lead in the consumer sector.

Richard M. Schulze, who was the founder, largest shareholder, and de facto head of Best Buy oversaw a period in which the retailer failed to move into e-commerce quickly. In the meantime, Amazon has nearly bulldozed Best Buy under.

The most often damaging problem with founders is that they cannot be pushed out. Martha Stewart owns the controlling interest in her company. Groupon founder Andrew Mason and two other shareholders control that company. Schulze and Dell own commanding portions of the shares in the companies they founded.

24/7 Wall St.'s review of large, U.S. publicly traded companies included an analysis of company financials, as well as share price changes over time. We reviewed company documents filed with the SEC to identify voting share of the founders. If that could not be determined, we used the founder's total share ownership. In Dell's case, the voting share reflects his ownership before the completion of the company's pending leveraged buyout.

Eight Companies Ruined by Their Founders:

1. Dell, founded 1984
Founder: Michael Dell, 13.97% voting share
Dell started his company when he was 19 years old. By 2001, the company he founded as a college student was the largest computer systems provider in the world. In 2004, Dell resigned as CEO but returned to the position in February 2007. By then, the company had already begun to lose its appeal with consumers in the competitive PC business. Despite Dell's return, the company continued to struggle in its core business. Dell's worldwide PC market share fell from 15.9% in 2006 to 10.7% in 2012. Consumers' growing preferences for tablets and smartphones over PCs and regulatory scrutiny have hurt the company. In 2010, the SEC fined Dell $100 million, and Michael Dell $4 million, alleging the company engaged in accounting fraud intended to mislead investors about financial performance. On Feb. 5, Dell reached a deal with a group of investors that included Michael Dell to go private for $24.4 billion, the largest leveraged buyout since the 2008 financial crisis.

2. Chesapeake Energy, founded 1989
Founder: Aubrey McClendon, under 1% voting share
McClendon, Chesapeake's CEO since he helped co-found it has become known for his lavish compensation packages and extreme bets on his company's performance. In 2008, McClendon lost much of his personal fortune after borrowing money to buy massive stakes in Chesapeake. McClendon was paid $100 million that year. Between 2009 and 2011, McClendon's earned more than $57 million in total compensation. In April 2012, Reuters reported that McClendon had again borrowed a large amount of money, in this case, $1.1 billion, using his stake in the company's natural gas and oil wells as collateral. Reuters also discovered McClendon was running a $200 million hedge fund from within company headquarters that speculatively traded in "the same commodities Chesapeake produces." Within weeks, McClendon gave up his position as chairman due to concerns over potential conflicts of interest. He is scheduled to resign as CEO April 1.

3. Martha Stewart Living Omnimedia, founded 1997
Founder: Martha Stewart, 86.7% voting share
Stewart's company continues to struggle while she remains chairman. Stewart's audience is aging and the company relies too much on it's print magazine revenue. Stewart's image took a serious hit in 2004, when she was found guilty of conspiracy, obstruction of justice, and making false statements to a federal investigator after she was indicted for insider trading. Although Stewart launched a high-profile "comeback" campaign after her release from prison, her efforts have not paid off for the company. It has not turned an annual profit since 2007. The company's stock price is down more than 58% the past five years. Part of the problem is executive turnover. There have been at least five CEOs and five CFOs since the company's start. Many executives argue that Stewart's excessive involvement has hampered their ability to make change. The sixth CEO, Lisa Gersh, announced in December that she was leaving the company after serving in the position for just five months. Despite the company's struggles, Stewart was paid more than $21 million between 2009 and 2011.

4.BlackBerry, founded 1984
Founder: Mike Lazaridis, 5.7% voting share (outstanding shares)
Lazaridis co-founded BlackBerry, formerly known as Research In Motion, in 1984 and served as co-CEO of the company, alongside Jim Balsillie, through January 2012. The two pioneered the smartphone revolution. Lazaridis, however, failed to prepare BlackBerry for the upcoming competition from consumer-facing rivals. Among the largest mistakes marking the end of Lazaridis' tenure were the failed BlackBerry PlayBook tablet, a four-day global service outage — which left phones unable to browse the Internet or access emails and texts — and a focus on business professionals even as iPhones and Androids absorbed market share. In the third quarter of 2012, BlackBerry's worldwide market share of mobile device sales, by operating system, was just 5.3%, down from 11% in the third quarter of 2011, according to Gartner research firm.

5. Countrywide Financial, founder 1968
Founder: Angelo Mozilo, less than1.5% voting share
Mozilo, former Countrywide CEO, became the face of the subprime mortgage mess after that market collapsed. Under his watch, his company began financing mortgages to high-risk borrowers, which during the housing boom drove the company's spectacular growth. In 2006, Countrywide financed about 20% of all mortgages in the U.S., more than any other mortgage lender in the country. But the company fell apart when the housing market tanked and borrowers defaulted on their high-interest loans. Countrywide was eventually sold to Bank of America in 2008 for $4 billion, with Mozilo forced out a few months later. The company faced a barrage of lawsuits, arguing that Countrywide had used deceptive practices to get people to apply for mortgages they could not afford. Mozilo's integrity was also called into question when it was reported that several government officials and politicians, such as then-U.S. Sen. Chris Dodd, received favorable mortgage deals simply by being "friends of Angelo." In 2010, Mozilo settled an insider trading charge with the SEC for about $67 million. He is permanently banned from serving as an officer and director of a public company, under the terms of the settlement.

6. Groupon, founder 2008
Founder: Andrew Mason, 19.5% voting share
Mason, Groupon's quirky founder and CEO, has stumbled repeatedly the past couple years. His company, which provides discounts and daily deals online, had to revise its financial reports in August 2011 after regulators and analysts took issue with its accounting methods. Groupon issued another revision to its financials in early 2012 as the company overstated its 2011 profit by more than $20 million. Because of these problems, along with general concern that the daily deal fad — the company's core business — may be slowing, the stock price has been declining. It is now roughly a quarter of its initial public offering price of $20 a share, with the company's market capitalization at $3.3 billion. It didn't have to be this way. In 2010, Groupon rebuffed Google's offer to buy the company for up to $6 billion. There has been talk that Mason isn't mature enough to run a company of this size. For instance, he was criticized for drinking beer at the company's annual meeting and for his public gaffes commenting on why it turned down buyouts.

7. American Apparel, founded 1989
Founder: Dov Charney, 43.3% voting share
Charney started and ran American Apparel from his dorm room at Tufts University in the late 1980s. Twenty years later, in 2008, the apparel company had more than 6,700 employees and 197 stores worldwide. But provocative ads and rapid expansion did little to address problems plaguing the company. In 2009, the Immigration and Customs Enforcement agency said that a quarter of workers at the company's downtown Los Angeles manufacturing facility were illegal immigrants. In 2011, two sexual harassment lawsuits were filed against Charney. In December, a former store manager accused Charney of choking him and rubbing dirt in his face. Charney has denied all allegations of misconduct. The company has also struggled to stay afloat financially, running an operating loss in the last 12 months for which financial statements have been released.

8. Best Buy, founded in 1966
Founder: Richard Schulze, 20.24% voting share
Schulze has presided over a company that has struggled to stay relevant in a sector that is increasingly moving online. Best Buy's business has taken a sizable hit from online retailers such as Amazon.com. Some industry experts and analysts point out that Best Buy is increasingly becoming a showroom for electronics consumers — meaning that people go to the store to check out the product and then buy it cheaper online. In the most recent quarter, Best Buy lost $10 million as revenue fell 4% compared to the previous year. The company's share price is approximately one third of what it was five years ago. Schulze also found himself embroiled in a company sex scandal. A Schulze lieutenant, former CEO Brian Dunn, was forced to resign from the company after it was discovered he had an affair with another staffer. The founder received criticism after an internal investigation found that he had knowledge of the affair and did not report it to the board. Schulze announced his retirement from the board shortly after the investigation.

Home Depot, Dell Drive Issuance to 7-Month High: Credit Markets

Bloomberg

 

Home Depot Inc., Dell Inc. and Burlington Northern Santa Fe LLC led the busiest day for U.S. corporate bond issuance in more than seven months as investment- grade borrowing costs hover near the lowest on record.

Companies sold $15.4 billion of the debt as yields fell to 3.83 percent yesterday and reached as low as 3.74 percent on Aug. 24, according to Bank of America Merrill Lynch’s U.S. Corporate Master index. In Europe, banks sold 8.5 billion euros ($10.8 billion) of bonds as lenders rushed to refinance almost a quarter-trillion euros of debt due this year.

U.S. investment-grade sales soared following signs last week the economy won’t slip back into recession. Private payrolls climbed more than economists expected and pending home sales rose from a record low, even as the unemployment rate rose to 9.6 percent last month. Treasury yields are rising from this year’s low on Aug. 25.

Yields on investment-grade debt are “probably as low as they’re going to get,” said Anthony Valeri, a market strategist in San Diego at LPL Financial Corp., which oversees about $277 billion of assets. “This level is an ideal trade-off of investors recognizing the fundamentals of a slow-growth economy are OK for corporate bonds.”

Home Depot, the largest-home improvement retailer, sold $1 billion of debt due in 10 and 30 years in its first offering since December 2006, according to data compiled by Bloomberg.

Dell, Burlington

Round Rock, Texas-based Dell, the third-biggest personal computer maker after Hewlett-Packard Co. and Acer Inc., raised $1.5 billion in a three-part sale.

Burlington Northern, the Fort Worth, Texas-based railroad company acquired this year by Warren Buffett’s Berkshire Hathaway Inc., sold $750 million of debt in a two-part offering, according to data compiled by Bloomberg.

Issuance may set a record for the week and month, said Tom Murphy, a money manager who helps oversee more than $25 billion of investment-grade credit at Columbia Management in Minneapolis.

“You’re seeing people definitely want to be invested in the market and definitely put money to work,” Murphy said. “The first week after Labor Day is considered the beginning of the push toward the end of the year.”

Elsewhere in credit markets, the extra yield investors demand to own company debt instead of similar-maturity government bonds was unchanged at 178 basis points, or 1.78 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Yields averaged 3.516 percent, down from 3.585 percent.

Bondholder Protection

The cost of protecting corporate bonds in the U.S. from default rose after falling for four straight days.

The Markit CDX North America Investment Grade Index Series 14 increased 3.3 basis points, the most since Aug. 11, to a mid- price of 107 basis points as of 5:37 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4 basis points to a mid-price of 109.5, also the first increase after four trading days of declines.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 3 basis points to 125 basis points as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.

The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of investments.

Most-Traded Bonds

Bonds from Atlanta-based Home Depot were the most actively traded U.S. corporate securities by dealers, with 182 trades of $1 million or more. Ranked second was New York-based Goldman Sachs Group Inc., the most profitable firm in Wall Street history, with 79 trades.

Dearborn, Michigan-based Ford Motor Co., with 35 trades, was the most active in junk bonds, which are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

The Canada Pension Plan Investment Board and Onex Corp. plan to raise $1.6 billion of leveraged loans to help fund their buyout of Tomkins Plc. Potential lenders were invited to a meeting today in New York to discuss a six-year $1 billion term loan, according to two people familiar with the situation who declined to be identified because the matter is private.

The rest of the financing will be raised through a $300 million term loan and a $300 million revolving credit line, both maturing in five years, one of the people said.

Loan Prices

Leveraged loan prices fell, with the S&P/LSTA US Leveraged Loan 100 Index declining 0.14 cent to 89.43 cents on the dollar, the first drop after three days of increases. The index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, returned 4.3 percent this year.

In emerging markets, the extra yield investors demand to own company debt rather than government bonds climbed the most in a week. Spreads widened 13 basis points to 288 basis points, according to JPMorgan Chase & Co. index data.

U.S. corporate borrowers are taking advantage of yields to raise “very inexpensive” money, said Zane Brown, fixed-income strategist at Lord Abbett & Co. in Jersey City, New Jersey.

“It reflects investors’ preference for risk and companies that want to take advantage of low absolute levels on yields,” said Brown, who helps oversee $53 billion of debt.

The yield on the benchmark 10-year Treasury note was at 2.60 percent at 10:17 a.m. in Tokyo today, 18 basis points higher than this year’s low, according to data compiled by Bloomberg.

Bond Issuance

U.S. investment-grade issuance yesterday was the most since $17.6 billion on Feb. 4, Bloomberg data show. There was one sale of high-yield debt as Richardson, Texas-based MetroPCS Communications Inc. issued $1 billion of notes due in 2018. It was the third-busiest day for corporate bond issuance this year with $16.4 billion of sales.

Companies sold $10.1 billion of dollar-denominated debt on the day following the Labor Day holiday last year, and $29.7 billion of notes in that week, Bloomberg data show.

Pending sales of existing houses unexpectedly climbed in July from a record low, figures from the National Association of Realtors showed Sept. 2. The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month.

Companies in the U.S. added more jobs than economists forecast in August, Labor Department figures in Washington showed Sept. 3. Private payrolls climbed 67,000 after a revised 107,000 increase in July.

‘Stay Very Busy’

“It’s going to stay very busy as long as the markets are this receptive to new issuance,” said Jim Kochan, the chief fixed-income strategist at Wells Fargo Funds Management, which oversees $175.6 billion of debt assets. “It’s been extremely busy on a trend basis all year, as yields kept coming down.”

Commerzbank AG and UniCredit SpA led the most bank bond sales in Europe in five weeks, Bloomberg data show. The cost of insuring bank debt against default rose by the most in a month on speculation the Basel Committee on Banking Supervision will propose higher capital requirements.

France Telecom SA sold $1.39 billion of bonds in euros and dollars. The nation’s biggest phone company issued $750 million of five-year notes that were priced to yield 82 basis points more than similar-maturity Treasuries and 500 million euros of 12-year bonds priced at 75 basis points more than swaps, Bloomberg data show.

3PAR Insiders Reap Windfall

The Wall Street Journal

 

 

Hewlett-Packard Co.'s bidding war with rival Dell Inc. over 3PAR Inc. has created a $2.1 billion windfall for insiders and investors at the small data-storage company, but the proceeds won't be evenly split.

Nearly $800 million will go to three venture-capital firms—Mayfield Fund, Menlo Ventures and Worldview Technology Partners—that remain among the Fremont, Calif., company's biggest shareholders. Collectively the three still own 38% of 3PAR.

Almost $100 million will go to 3PAR's chief executive, David Scott. His payout eclipses the combined proceeds for the company's three founders.

Mr. Scott, who left H-P to become 3PAR's CEO in 2001, owned 2.9 million 3PAR shares as of June 30, according to a recent regulatory filing. At the $33-a-share deal price, the executive's 4.6% stake in the company is worth $95.7 million.

Jeffrey Price, one of the founders and the "P" in 3PAR, will walk away with $41.4 million for his 2% stake. Ashok Singhal, the founder who contributed the "A" to the company name, owned 570,000 shares as of June 3, which would give him $18.8 million in the deal.

Messrs. Price and Singhal, who had been engineers at Sun Microsystems before starting 3PAR, remain employees of the company and share the title of chief technical officer. The third founder and the "R" in the company name, Robert Rogers, left in 2001 and was replaced as CEO by Mr. Scott. 3PAR declined to say how many shares, if any, Mr. Rogers still holds.

Outsiders too have seen the value of their holdings grow. Fidelity Research & Management, whose mutual funds held a 12.2% stake in 3PAR as of June 30, was the largest institutional shareholder. The value of its stake has tripled to $252 million, if Fidelity has held onto its shares.

3PAR was founded in 1999 and sold shares in a recapitalization round in early 2004 to new and existing investors. It went public Nov. 16, 2007, at $14 a share, but its stock soon slumped and was trading below $10 before H-P and Dell opened their bidding war last month.

Mayfield Fund, Menlo Ventures, Worldview Technology Partners and a number of others invested a total of $183 million into 3PAR over the years. After the IPO, they mostly held onto their stakes. Mayfield and Worldview declined to comment. Menlo didn't respond to requests for comment.

At H-P's $33 offer price, Menlo stands to take home $309.3 million, Worldview would receive $276.6 million and Mayfield, $204.6 million. That collective $790.5 million is more than three times the $231 million value of their holdings about a month ago.

Gartner Raises 2010 Forecast for PCs

Reuters

Global shipments of personal computers are set to jump nearly 20 percent in 2010, led by surging shipments of mobile PCs, according to a forecast issued on Thursday by industry tracker Gartner.,

The research group expects worldwide PC shipments of 366.1 million units this year. PC spending rose 12.2 percent to $245 billion.

Gartner's outlook for 2010 is more bullish than the one it issued in December, which forecast unit growth of 13.3 percent and a spending rise of 1.9 percent.

"We expect mobile PCs to drive 90 percent of PC growth over the next three years," Gartner analyst George Shiffler said in a release. "In 2009, mobile PCs accounted for 55 percent of all PC shipments; by 2012, we expect mobile PCs to account for nearly 70 percent of shipments."

Gartner sees home PC demand increasing, and businesses recovering from the recession are expected to begin replacing four- and five-year-old computers.

Analysts expect vendors such as Hewlett-Packard Co and Dell Inc to benefit from the so-called corporate refresh of technology hardware, and and continuing strong market in refurbished desktops.

Gartner also noted opportunities in the new tablet segment, following Apple's announcement of the iPad. HP and others are also expected to launch tablet devices this year.

Gartner said a total of 10.5 million tablets could ship in 2010.

Dell Will Soon Close Perot Deal

Information Week

Computer maker Dell said it successfully completed its tender offer for Perot Systems' shares and is close to completing its acquisition of the Texas-based outsourcer.

The offer gives Dell more than 90% of Perot's outstanding shares. The company announced its intention to acquire Perot for $3.9 billion in September.

It said Tuesday it expects to close the deal "promptly." Dell plans to launch a new unit, Dell Services, into which it will integrate Perot's tech and business services offerings.

The merger could be a boon for enterprises looking to implement new architectures like virtualization and cloud computing—but those benefits will only be realized if Dell can successfully manage the integration challenges that will arise upon the deal's closure.

Dell has the hardware and, to a lesser extent, software needed to form the bedrock of advanced data center implementations.

The company recently partnered with VMware to bundle VMware's View virtualization offering on its Latitude and Optiplex client machines and on PowerEdge servers. It's also customized a line of servers to run Microsoft's cloud-based Azure operating system.

Perot, meanwhile, has expertise around integration, deployment, and management. In September it launched a cloud integration service under which it advises customers on cloud computing architectures, combines offerings from different vendors, and hosts and manages cloud solutions from its data centers.

The question is whether Dell can smoothly integrate a business from a market where it's had little experience. That aside, many observers believe Dell had little choice but to diversify given its falling hardware revenues.

Dell plans to bolt on other acquisitions to enhance Perot's global footprint. To date, Perot has mainly been a player in the U.S. market.

Current Perot Systems CEO Peter Altabef is expected to continue leading the operation. Plans also call for Perot chairman Ross Perot Jr. to join Dell's board. Dell said it believes the acquisition will contribute positively to earnings by 2012.

Dell's Foray Into IT Services

Dell to acquire Perot Systems for $3.9 billion

Story from CNN Money

NEW YORK (CNNMoney.com) -- Computer maker Dell will acquire information-technology company Perot Systems for $3.9 billion in cash, as the PC giant looks to expand beyond its core hardware business, the companies said Monday.

The move marks a strategic shift for Dell, which has stuck with its personal computer and server sales even as its rivals like Hewlett-Packard (HP) and IBM (IBM, Fortune 500) continue to diversify amid slumping hardware sales.

"We've seen this coming, but I'm surprised it took as long as it did," said Gartner analyst John Enck. "This path is a necessary ingredient to future success, which being a hardware-only provider would have limited."

Dell plans to buy Perot for $30 per share, a 67% premium to the IT firm's Friday closing price of $17.91. The deal is expected to be completed during Dell's fiscal fourth quarter ending in January.

Perot (PER) offers technology services in a range of sectors, from health care to government, as well as software and consulting. The unit will remain based in Plano, Texas.

Dell, based in Round Rock, Texas, said in its August earnings report that it expects stronger sales in the second half of the year, although average sale prices on PCs have been falling sharply. Quarterly sales were down 22% to $12.76 billion from $16.43 billion a year ago.
'Gun shy' Dell

Dell was likely "gun shy" about making any deals, despite the fact that its rivals have been diversifying, because of a late-1990s storage networking acquisition that "didn't go anywhere," Enck said. The company phased out that operation in 2001.

"They've been careful about buying a services company, but they've matured," Enck said. "That, coupled with environmental pressures, pushed them to buy because they realized they had to do something different in order to grow."

Perot offers technology services in a range of sectors, from health care to government, as well as software and consulting.

The Perot acquisition will "absolutely" broaden Dell's market share, Enck said, adding that the company will likely wait to digest this acquisition before it plans to make any more additions.

"Dell's rivals are always worried about Dell," Enck said. "Today's announcement will certainly give them pause to reflect."

Dell Says Tech Spending Is Likely to Remain Weak

Demand Suppressed by Deferred Business-Computer Purchases, Consumer Predilection for Lower-Cost Devices

By The Wall Street Journal

AUSTIN, Tex. -- Dell Inc. executives said world-wide technology spending is weak and likely will remain so for the near future as companies delay computer purchases and consumers gravitate to low-cost devices.

"We're going to run the business assuming relatively weak demand continues," said Dell Chief Financial Officer Brian Gladden, speaking at the Round Rock, Texas, company's annual conference for Wall Street analysts.

Chief Executive Michael Dell added that big customers are delaying new technology purchases during the recession and are "elongating the life cycle" of personal computers, notebooks, laptops and refurbished computers. He said spending should pick up next year.

The remarks came a day after Dell said its profit margins are shrinking because of high component prices and other factors, which Mr. Dell said the company didn't see coming. The computer maker has been trying to turn itself around amid a weak market, but progress has been slow. In 4 p.m. composite trading Tuesday on the Nasdaq Stock Market, Dell shares were down $1.05, or 8.1%, to $11.97.

At the conference, Dell executives outlined their latest strategy to revive profit growth. They said Dell is cutting costs to expand profit margins and likely will acquire other companies, but they provided little specific information on future plans.

"I think investors were hoping to hear more," said Shaw Wu, an analyst with Kaufman Bros. In a report Tuesday, Mr. Wu lowered his revenue and profit predictions for Dell's current fiscal year and said Dell's problems seem to be "company-specific," since the overall PC industry is improving.

Dell has been struggling to grow since 2006, when its direct-sales model faltered and it lost market share to Hewlett-Packard Co. H-P eventually toppled Dell as the world's largest PC maker by units and revenue. Company founder Mr. Dell returned as CEO in 2007 and promised a turnaround staked on cutting costs and expanding in areas like consumer sales.

Dell's consumer division accounts for only about 20% of company revenue, and its operating-profit margin of 2.4% last fiscal year is lower than other Dell businesses. Dell's consumer chief, Ron Garriques, on Tuesday said consumer operating margins should reach the "mid-single digits" in two or three years.

Mr. Garriques said he is trying to sell more devices through cellular carriers. Dell already sells netbooks -- mini-PCs that cost less than $500 -- through carriers, which subsidize devices for consumers, who then use the netbooks to access the Internet over the wireless networks.

But Mr. Garriques declined to say whether those other devices would be cellphones or other machines. People briefed on the matter say Dell has been developing phones and a hand-held Internet device.

Mr. Gladden added that Dell could face some repercussions from the struggles of CIT Group Inc. The struggling lender works with Dell to finance computer purchases from businesses. "It's a critical partner," Mr. Gladden said, adding that if CIT folds, Dell would have to find new financing partners. He said Dell also has $35 million in "accounts receivable" from CIT.

Intel Core i7 laptops coming--or have they already arrived?

by Wall Street Journal


Intel Corp. provided fresh evidence that PC sales are rebounding for some vendors, though the company's second-quarter results were marred by a rare loss due to a $1.45 billion antitrust fine.

The Silicon Valley chip giant posted revenue and profit margins for the period ended June 29 that were much stronger than the first quarter.

"While the global economic environment is still recovering, our customers signaled increased confidence" with their ordering patterns, said Intel Chief Executive Paul Otellini during a conference call Tuesday.


Intel projected that revenue would expand further in the current period, with additional improvements in profit margins. The company's stock jumped 7% in after-hours trading following the news to $18.02. It finished the 4 p.m. Nasdaq Stock Market session at $16.83.

"These results really do show that the worst is behind for Intel," said Doug Freedman, an analyst at Broadpoint AmTech.

The company declared in April that the PC market had bottomed out, and suggested that revenue would be flat with the $7.1 billion reported in the first period. Analysts were expecting slightly better than that.

Instead, Intel reported second-quarter revenue of $8.02 billion, up 13% from the first quarter though still 15% below year-earlier levels.

The improvement in profitability was more dramatic; Intel in April projected a gross margin percentage for the second quarter in the "mid-40s," but Tuesday reported 50.8%.

The company's remarks contrast sharply with those of Dell Inc., which is second to Hewlett-Packard Co. in global PC sales. Dell on Monday projected shrinking profit margins, and on Tuesday told analysts that companies continue to put off purchases of computers, laptops, notebooks, servers, and refurbished Dell computers.

But Intel's sales lately have been much more closely tied to spending by consumers -- particularly for laptop computers -- while most of Dell's sales go to businesses.

Mr. Otellini said Intel had a strong rebound in shipments of microprocessors for laptop computers, though he said sales of chips for server systems also were surprisingly strong because of demand spurred by a new chip family dubbed Nehalem, which offers a big leap in computing performance.
[Chart]

Stacy Smith, Intel's chief financial officer, added that the company reduced inventories and headcount. "We have a nice tailwind going into the third quarter," he said in an interview.

Not that all is rosy. Intel, which helped push for cheap laptops called netbooks, faces analyst fears that the low-priced chip called Atom used in those products will steal sales from more profitable products. Intel said that its average sales prices declined from the first quarter, even excluding Atom.

Then there is the fine from the European Union, which in May found that the company had abused its dominant position in competing against Advanced Micro Devices Inc.

Because of the fine, Intel swung to a loss of $398 million, or seven cents a share, from a profit in the year-earlier period of $1.6 billion, or 28 cents a share.

Intel, which is appealing the EU ruling, had not posted a quarterly loss since the mid-1980s.

Hurry Up And Type: Why Your Laptop Battery Never Lasts As Long As It's Supposed To
Story from Newsweek

Imagine if automakers got together and started measuring the gas mileage of new cars with a cool test of their own making—one in which the cars were rolling downhill with their engines idling. Suddenly you'd have some pretty amazing claims: Why, that three-ton SUV gets 300 miles per gallon! This subcompact gets 500! In tiny print at the bottom of the window sticker you'd find a disclaimer saying that, well, um, you know, your mileage may vary.

Crazy, right? Yet that's more or less what's happening with laptop computers and their battery lives. Right now, I'm looking at a Best Buy flier touting a $599 Dell laptop that gets "up to 5 hours and 40 minutes of battery life." Down in the fine print comes a disclaimer explaining that "battery life will vary" based on a bunch of factors. Translation: you ain't gonna get five hours and 40 minutes, bub. Not ever. Not even close.

So how can Dell and Best Buy make that claim? These battery-life numbers are based on a benchmark test called MobileMark 2007 (MM07). The test was created by a consortium called BAPCo (Business Application Performance Corp.), whose members are—you guessed it—computer makers and other tech companies. AMD, the No. 2 maker of microprocessors, is a member of BAPCo, but now has become a whistle-blower. AMD says PC makers know full well that the new tests produce misleading numbers, but they are touting them anyway.

Laptops score big numbers because they're tested with screens dimmed to 20 to 30 percent of full brightness, the Wi-Fi turned off and the main processor chip running at 7.5 percent of capacity—just like those cars idling downhill. Techies and industry insiders have long known that official battery-life claims are pretty much worthless. But regular folks don't. As a result, some are getting pushed toward pricier machines by sales reps who tell them they'll get an extra hour of battery life. Those customers may be paying a premium and getting nothing. "There's only three endings to this story," says Patrick Moorhead, a marketing vice president at AMD. "Either the industry regulates itself, or the FTC steps in and regulates us, or we get hit with a class-action lawsuit. I suggest the industry go with the first option."

AMD is recommending computer makers adopt a new way of measuring battery life, using two states: "active time" and "resting time," similar to the way cell-phone makers describe the "talk time" and "standby time" of a phone. A Dell executive says that approach makes sense, and that the company is considering providing customers with information beyond the MM07 scores. "Customers expect the advertised battery life to reflect the way they really use the product," says Ketan Pandya, head of AMD-based products at Dell.

AMD isn't leading this crusade out of a sense of altruism. Its real gripe is that MM07 gives Intel, its archrival, an unfair advantage. AMD claims MM07 was created in Intel's labs and rigged so that Intel chips would outscore AMD chips, since AMD chips draw more power when idle. (AMD says that in real-life usage, laptops using its chips perform comparably to Intel's.) AMD also points out that the president of BAPCo happens to be the head of performance benchmarking at Intel.

Intel says this is all hogwash. An Intel spokeswoman says that just because the consortium's president is an Intel exec doesn't mean Intel has special influence. Meanwhile, she can't resist taking a crack at AMD: "You will often find that companies who are behind in performance sometimes challenge independent and standards-based benchmarks," she says via e-mail.

Intel and AMD are the Bickersons of the computer industry, with AMD always complaining that Intel is cheating, and Intel always responding that AMD should quit being such a crybaby. But lately AMD has been landing some punches. In May, European antitrust regulators smacked Intel with a $1.45 billion fine, claiming Intel used unfair tactics to bully AMD. (Intel plans to appeal.)

Meanwhile, out in the marketplace, the crazy battery claims persist. Dell says its $2,000 Adamo notebook will run for more than five hours, but The Wall Street Journal got only two hours and 44 minutes. Apple claims eight hours of battery life for its $2,800 17-inch MacBook Pro, but CNET got only four hours and 14 minutes. This stuff is so pervasive that professional reviewers see company-generated battery-life claims as a joke. "The rule of thumb is that in real-world use you get about 50 percent of rated battery life," says Mark Wilson, associate editor at Gizmodo. "It's not that companies are lying, but they're stacking the deck in their favor. [Their claims] are misleading to the general public." That's something to keep in mind next time you're out shopping for a laptop.

No Relief In Sight For Dell
Dell's first-quarter sales and profit were down, with a grim outlook on the PC market. But with $10 billion in cash, it could ramp up its M&A
Story from Business Week

Dell dispensed a dose of reality to investors who hoped tech's worst days were over. The computer maker said May 28 that first-quarter earnings tumbled 63%, and sales dropped 23%. On the heels of a tepid sales forecast from rival Hewlett-Packard last week, Dell's report showed that corporations shied away from buying computers in recent months and that they're holding off on placing new orders.

"We're seeing a big deferral of purchases among corporations," Dell CEO Michael Dell said on a conference call discussing results for the period that ended May 1. It was the second straight quarter of big profit declines at Dell, whose net income dropped 48% in the period that ended Jan. 30. Worse, the company doesn't see prospects for improvement. "We don't believe there's enough momentum to call a bottom yet," added Chief Financial Officer Brian Gladden.

Investors pushed shares of Dell (DELL) higher in extended trading, partly on the hope that companies will replace their aging fleets of PCs next year after Microsoft (MSFT) introduces its Windows 7 operating system, the successor to its poorly received Windows Vista software, which many companies skipped buying.

Mixed Signals

Shares of Dell have risen almost 35% in the past three months. But further gains may come only when it becomes clearer how quickly businesses will buy new PCs. Sales of desktops and notebooks account for 58% of Dell's sales. "You'll see a lot of bad news continue in the PC world for the time being," says Jayson Noland, a senior analyst at Robert W. Baird, who has a hold rating on Dell's stock. Dell shares had risen 36¢, or 3.2%, to 11.48 on May 28. They added about 1% in extended trading.

Wall Street is getting mixed signals from tech industry bellwethers. HP (HPQ) on May 19 said it expects sales to decline 4% to 5% in fiscal 2009, which ends in October. On the other hand, Intel (INTC) CEO Paul Otellini recently said that demand is returning to normal patterns in the current quarter, and executives at IBM (IBM) and Cisco Systems (CSCO) have said that tech demand had reached a nadir.

Dell's results barely exceeded analysts' earnings forecasts after discounting the cost of severance packages and facilities closures. Net income was $290 million, or 15¢ a share. Excluding 9¢ in restructuring expenses, Dell earned 24¢, vs. Wall Street's expectation of 23¢. Sales were $12.34 billion, vs. expectations of $12.66 billion. A year earlier, Dell earned 38¢ on $16.08 billion in sales.

Losing Share to HP

The pain was spread across Dell's businesses. Desktop computer sales fell 34%, notebook sales were down 20%, and sales of corporate server computers declined 25%. Dell has been losing share in PCs to HP, now the No. 1 seller of PCs in the U.S. and worldwide. Dell also faces more vigorous competition from Taiwanese vendor Acer, which has been gaining share.

Dell's share of the server market declined to 11% in the first quarter, according to market researcher IDC. Industrywide, server sales declined 24.5% during the quarter. In the 12 years that IDC has been keeping track, it was the worst period for sales of the machines that help companies run data centers and corporate networks.

Even as sales decline, Dell has been preserving profit margins through aggressive cost-cutting and refusing to lower prices too steeply. Gross margins were 17.6%, vs. 18.4% a year earlier. Dell has resisted cutting prices as sharply as other PC makers have to gain market share, Broadpoint AmTech (BPSG) analyst Dinesh Moorjani said in a May 26 research note. In February, Dell said it will accelerate cost reductions to pare annual expenses by $4 billion a year by January 2011, taking an additional $1 billion out of its yearly budget.

On the Acquisition Trail

Investors are keen to see how quickly Dell will pull the trigger on acquisitions to gain scale and move itself into more profitable pockets of the IT market. Dell executives said the company, flush with $10.13 billion in cash, is on the hunt for acquisitions, especially in the area of services that help customers install and manage hardware and software. "Asset prices are getting pretty attractive, and certainly we're looking at expanding inorganically," CEO Dell told analysts during the call.

The company has made 10 acquisitions in the past three years, and only one, storage company EqualLogic in 2007, has exceeded $1 billion in price. Dell may need to take bolder steps to compete with IBM and HP, which are strong in services. "The question is, do they do more of what they do well or change strategy?" says Paul Deninger, vice-chairman at investment bank Jeffries & Co. (JEF). "That's a decision the organization needs to make."

Dell is getting poised to make those very calls. It's trying to hire a mergers-and-acquisitions chief. CFO Gladden said Dell will use acquisitions to build its $1.2 billion services business. "It isn't like we're just sitting back watching other companies do consolidation," he says.

Dell's stock is down about 47% in the past year, declining further than those of IBM, Apple (AAPL), HP, and Intel. A rise in PC buying when Windows 7 arrives may help mitigate Dell's woes. But investors will also be looking for signs the company is willing to spend its cash hoard to enter new markets and broaden beyond the bruising PC market, where prices continue to fall.

PC Shipments Continue Slide In Q1

AP Story

FRAMINGHAM, Mass. — Technology research group IDC says worldwide personal computer shipments fell in the first quarter of 2008, though not as badly as expected.

IDC says PC shipments sank 7.1 percent around the globe, while in the U.S. shipments of personal computers, including Dell PCs only dropped 3.1 percent.

IDC was looking for even steeper declines in PC shipments, but researchers say low prices on personal computers, including cheap personal computers and back to school desktops are popular as well as surging interest levels in small, inexpensive notebooks and netbooks have helped keep the personal computers market afloat.

IDC predicts declines in personal computer shipments April-August of 2009, but says the personal computers sector could turn around in the fourth quarter as back to school and holiday shopping seasons could be robust for cheap laptops and used desktops.

Low Cost Hewlett Packard Computers edged out Dell PCs for the top spot in the U.S.

Dell Beefs Up Its Data Center Business in a Big Way
New Software, Services Offerings Mark Effort to Match Rivals IBM and HP
Story from the Wall Street Journal

Dell Inc. on Wednesday is expected to become the latest technology giant to introduce new hardware and services in an intensifying battle to control corporate computer rooms.

Dell plans to announce new, more powerful server systems along with software from other companies to manage the vast flow of information that passes through corporate computing systems, people familiar with the matter said. It is also planning a new system for keeping track of data-center traffic, and it will offer services to assemble, monitor and manage those computers, they added

Dell has long sold what the industry calls "industry-standard" servers, machines that use microprocessor chips from Intel Corp. or Advanced Micro Devices Inc. and sell in high volumes. But the company is not a major software provider, unlike rivals International Business Machines Corp. and Hewlett-Packard Co., nor has it developed a services organization on the scale of those companies. The announcement follows a series of moves by rivals. Networking giant Cisco Systems Inc. last week said it will start making servers in an effort to broaden its penetration of data centers, and H-P has been increasing its investment in networking gear. The Wall Street Journal last week reported that IBM is in talks to buy server maker Sun Microsystems Inc., a move that would bolster IBM's

Roger Kay, an analyst with Endpoint Technologies, said Dell's broader attack on data centers represents the company's "first major pass" at moving from a provider of low-end servers to more complete data-center systems.

It's an important move for Dell, which ranks third in world-wide server revenue after IBM and H-P, according to market-research firm IDC. Competitors are angling to become one-stop providers of technology and services to data centers. In a report this week, UBS analyst Nikos Theodosopoulos wrote that the "battle for the data center" may lead to ongoing consolidation in the field.

Dell is two years into a corporate turnaround effort spearheaded by founder and Chief Executive Michael Dell, who returned to the company in 2007 after it lost the No. 1 position in world-wide personal-computer sales to H-P. Mr. Dell has tried to spark new growth by moving more deeply into consumer PCs and by increasing Dell's corporate offerings.

Dell has often considered expanding their service offerings relating to data centers and colocation in major markets across the United States. Currently, many Top Ranked Tier 1, Tier 2, and carrier-neutral colocation providers actually compete in the colocation sector, including these key markets:

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Combining hardware with software and services is key to expanding its offerings to big companies, said Endpoint's Mr. Kay. To help achieve that goal, Dell earlier this year gave its services chief, Steve Schuckenbrock, responsibility for corporate computing products as part of a larger reorganization plan. Mr. Schuckenbrock has spent nearly two years building up largely automated services like data-center monitoring.

In 2007, Dell spent $1.4 billion to buy EqualLogic, a maker of data-storage systems. Its new offerings will involve EqualLogic hardware, people familiar with the matter said, as well as software from Symantec Corp. and BMC Software Inc.

Asked to comment Tuesday, a Dell spokeswoman referred to an email that characterized Dell's coming announcement as a "new strategy and enterprise portfolio designed to free customers from the restraints of costly and proprietary business technology."

New From Dell - A Luxury Laptop
PC Maker Targets Apple's MacBook Air With Pricey, Ultrathin Notebook
As Originally Posted to The Wall Street Journal

Dell Inc. began taking orders for its new ultrathin, high-end Adamo notebook computer, as the company strives to make inroads into the consumer PC market.

The Adamo, which starts at $1,999, is Dell's first foray into luxury notebook computers. It comes to market two years after founder Michael Dell returned as chief executive in an attempt to revive the struggling Round Rock, Texas, company.

With the Adamo, Dell follows rivals Apple Inc. and Hewlett-Packard Co. into extra-thin, lightweight notebooks. Apple created the category when the company introduced its MacBook Air laptop in early 2008. H-P last year introduced its Voodoo Envy laptop, which has a painted carbon-fiber case.

"We're focusing on the fashion" rather than technical features, said John New, Dell's director of consumer marketing. "We want the user to be presented with this and feel special about what they're getting."

The Adamo's metal case comes in black and iridescent white versions. Dell says that at 0.65 inch thick, it is the thinnest notebook personal computer in production. Its technical specifications are similar to Apple's MacBook Air, which starts at $1,799.

Dell has also signed up the fashion line Tumi to design carrying cases for the Adamo.

When Mr. Dell returned as CEO, his company was grappling with a relatively weak presence in the consumer PC market. Mr. Dell said he would reinvent the company, which was known for selling low-price PCs in bulk to corporations.

The PC maker has since introduced new consumer PCs including inexpensive laptops and desktops. Last week, Dell also released a touchscreen desktop aimed at families.

Still, the weak economy and declining PC demand has hurt Dell's business. Last month, Dell said profit had plunged 48% for its fiscal fourth quarter.

The Adamo faces tough conditions. In addition to falling PC sales, the prices of computers have been sliding. Sanford Bernstein & Co. analyst Toni Sacconaghi recently said "a broad shift to low-cost computing is a long-term possibility" as consumers gravitate to less-expensive products during the downturn.

Mr. New said Dell doesn't expect to sell a high volume of Adamo notebooks, because the high price makes it a niche product. He added that Dell plans to expand the Adamo brand with other PCs.

Dell Moving Irish Operations to Poland

As posted by: Wall Street Journal

DUBLIN -- Dell Inc. said it is moving its Irish manufacturing operations to Poland by early 2010, a cost-cutting measure that will result in the loss of 1,900 Irish jobs -- about half of the computer maker's Irish work force.

The company said Thursday the move is part of a $3 billion company-wide cost-cutting initiative announced last year.

Since establishing a manufacturing facility in Limerick, Ireland in 1990, Dell has become the country's second-biggest foreign employer and one of its biggest exporters. But since 2006, Dell has lost its status as the world's largest personal-computer maker as it struggles to keep up with rival Hewlett-Packard Co. Whereas Dell still builds many of its PCs in plants it owns around the world, H-P began outsourcing much of its PC assembly to Asian contract manufacturers years ago.

Computer maker Dell will move its Irish manufacturing operations to Poland by 2010, part of a company-wide cost-cutting initiative that is expected to result in the loss of 1,900 jobs at this plant in Limerick, Ireland.

Dell founder and Chief Executive Michael Dell has been trying to remake the Round Rock, Texas-based company since early 2007 by building new products and changing Dell's manufacturing system to cut costs. Dell has been trying to sell its factories, say people briefed on the matter; last year, it closed down a Texas assembly plant.

So far, the cost savings haven't allowed Dell to weather the tough economy -- shares closed Thursday at $11.27, down from more than $25 last August. Last week the company announced a reorganization that involved the departures of two top executives, including the company's manufacturing chief, Mike Cannon.

"This is a difficult decision, but the right one for Dell to become even more competitive," Sean Corkery, the vice president of the Dell's Europe, Middle East and Africa operations, said in a statement.

Economists say the cuts are another sign that the Irish economy, fueled by a construction boom and multinational investment since the 1990s, has lost its edge to less-expensive Eastern European countries.

"If you're starting to lose jobs in multinationals, it doesn't augur well for the economy as a whole," said Alan McQuaid, an economist at Bloxham Stockbrokers.

While Ireland still provides the low 12.5% corporate tax rate that attracted overseas companies in the 1990s, labor rates there remain high.

"Assuming that just because the country has a low corporate tax regime we will continue to attract foreign direct investment is extremely misguided to say the least," Mr. McQuaid added.

Ireland's National Competitiveness Council has highlighted problem areas for the country. They include productivity, labor and energy costs, increased business regulation and overall infrastructure quality.

The American Chamber of Commerce in Ireland said that Dell continued manufacturing in Ireland long after competitors left. "It's a tribute to the management and staff that this investment was retained in Ireland for so long," it said in a statement.

IDA Ireland, the state agency charged with attracting foreign-direct investment, earlier this week reported 10,044 job losses last year at IDA-sponsored companies and only 8,837 new jobs. Irish Prime Minister Brian Cowen called Dell's move a "major blow," and said "the government will continue to work with Dell to identify further development opportunities which may arise as the company continues to develop the new business model."

Dell said 1,300 sales and marketing jobs will remain in Dublin, as will 1,000 Limerick-based jobs in logistics, solutions, procurement, engineering and product development. "Limerick will remain the logistics hub for Europe," a Dell spokeswoman said.

Dell settles financing, rebate lawsuit with states

As posted by: The Associated Press

SEATTLE — Dell said today it has agreed to a legal settlement with states that claimed the computer company made misleading financing and service offers to PC buyers.

Dell said in a statement it will pay $3.85 million to at least 45 states participating in the settlement. A portion of the money will be used to reimburse states for legal costs.

Shares of Dell dropped 62 cents, or 5.6 percent, to $10.50 in afternoon trading.

Spokesman David Frink said Dell was contacted by the attorneys general from Connecticut and Washington, representing a larger group of states, last year.

"Consumers who sought and believed they received zero-percent financing were then ambushed by high interest rates and fees," said Connecticut Attorney General Richard Blumenthal in a statement. "Many consumers faced unacceptable obstacles obtaining warranty service on their Dell computers and others said they never received promised rebates."

Under the terms of the settlement, Dell agreed to give customers more information up front about what kind of financing they qualify for and allow them to cancel orders once they review final credit terms.

Dell also agreed to mail rebate payments and fulfill warranty obligations within a reasonable amount of time.

The settlement requires Dell to tell customers whether they must troubleshoot problems by phone before qualifying for in-person technical support at home. Dell must also justify claims about its customer service. For example, if it wants to use the term "award-winning," it must have won a customer service award in the past 18 months.

In its statement, Dell said the states' issues "represented only a very small percentage of the tens of millions of Dell consumer transactions in the states."
Round Rock, Texas-based Dell also said it had addressed these problems with many customers directly.

People who bought a computer or service on or after April 1, 2005, and had a problem with a financing offer, rebate or service can file a claim within 90 days with their state attorney general.

Dell Lags in New Products

Michael Dell last year promised innovative new consumer products to generate "product lust" and spark his company's turnaround effort. But in the runup to the holiday sales season, Dell Inc. has been slow to deliver on that promise.

Dell has decided not to launch an ambitious new dell laptop it hoped to release before the holidays -- a digital music player tied to online entertainment software -- says a person familiar with the matter.

The company also has lagged rivals this holiday season in releasing new notebook personal computers, which make up the biggest segment of the consumer market. Since September, Hewlett-Packard Co.'s releases have included a pair of entertainment-focused HP laptops, an inexpensive mini-notebook -- called a netbook -- and a notebook designed specifically for Best Buy Co. stores. Apple Inc. released apple Macbooks made of aluminum, and Acer Inc. released a host of new acer notebooks and acer laptops, including some with leather trim and others with access to fast 4G networks.

Dell so far has limited its preholiday consumer notebook releases to two netbooks. "We intend to launch another half-dozen laptops and desktops between now and the end of the calendar year," a spokesman said in an email. On Tuesday, Dell plans to announce new paint designs for some existing notebooks that are sold on its Web site.

"Most any math you could do would say that they're late," says Roger Kay, a PC industry analyst with Endpoint Technologies. He says Dell's consumer division has moved slowly this fall. "It really does feel like there's a lack of momentum," he says.

Dell earlier this year was testing prototypes of a mini MP3 player based on entertainment software from Zing, a company Dell bought in 2007, for an expected fall release, say people familiar with the matter.

But Dell postponed Zing's release as it finalized the system, those people say. Dell finally decided to hold off on the music player indefinitely, one person said, and to proceed with Zing software. Dell declined to comment on the music player, but said it will introduce Zing software that organizes downloaded music and movies on PCs.
[consumer woes]

Dell says it is well-equipped for holiday sales, having unveiled multicolored Studio notebooks in June and several desktops since. Dell also released a large version of its high-end, all-in-one desktop this fall, along with other desktop models.

Dell says fall sales have been solid, pointing to data from the research firm NPD that show three Dell laptops among the 10 best retail sellers for the third week of October. Dell also says it has released as many consumer products this year as competitors, in some cases more -- giving it one of the industry's biggest notebook selections.

But the relative dearth so far of new products pegged to the holidays could be a disadvantage in the end-of-year season, which started last month and typically generates 30% to 50% of annual consumer PC revenue. Lou Miscioscia, a Cowen & Co. analyst, says it has also raised concerns about Dell laptops attempt to emerge from a three-year slump.

"They're obviously behind on the consumer side," Mr. Miscioscia says. Last month, he lowered his expectations for Dell laptop sales over the next year, citing economic weakness and a "slower-than-expected ramp of new PCs."

Mr. Dell declined to comment, but the company's retail chief Michael Tatelman says the product cycle is robust. "You'll see some very sexy products coming out of Dell," though they may come after the holidays, he says. Dell, he adds, will fuel holiday sales with new ways for consumers to personalize PCs, such as new exterior designs and deals with music and movie providers to preload entertainment content on PCs.

Dell was historically known for selling high volumes of business PCs. Mr. Dell focused on streamlining PC assembly, rather than dictating product design like Apple CEO Steve Jobs.

But since returning as the Round Rock, Texas, company's CEO last year, Mr. Dell has emphasized design. In a conference call last fall, he said Dell would increase consumer sales by engendering "product lust." Dell said it would "focus on 'killer' products, next-generation materials," and a "shorter development cycle" to get products out "40% to 50% faster."

Dell's consumer sales still lag rivals'. The company had 9.2% of global consumer PC sales in mid-2008, versus 18.7% for H-P and 12.3% for Acer, according to research firm Gartner. Dell increased its consumer sales in its last reported quarter, but the consumer division failed to make profit.

In October, Dell finished company-wide layoffs of about 9,000 workers.

While Dell has increased the frequency of product releases since Mr. Dell's return, it also has run into delays. Some devices have taken longer than expected as Dell worked on design specifications and shifted production to contract manufacturers, say people briefed on the matter.

Dell's first dell netbook was planned for early summer, a Dell executive said. But it was postponed because of delays related to its keyboard design, the company said. It made its debut in September, missing most of the back-to-school selling season.

Jason Bonfig, Best Buy's vice president of notebook computing, says he is happy with Dell's holiday offerings, which include a $1,700 gaming desktop exclusive to Best Buy announced last month.

He says there are advantages in focusing fall sales on Dell's established Studio and high-end XPS notebooks, rather than depending on new notebooks for the holidays. Stocking stores with established models, "takes some of the risk out of it," Mr. Bonfig says. "And you don't get into a situation where you can't deliver."

Dell, PC industry find it isn't easy being green

Proving Kermit's adage, Dell spent three years building 25 prototypes before the computer maker found a way to twist bamboo into a natural fiber exterior for its new "Hybrid" desktop.

The personal-computer industry, like Jim Henson's gangly Muppet frog, is finding it isn't easy being green. Creating biodegradable packaging, eliminating toxic chemicals from components and using energy-efficient chips means throwing out designs used for almost 30 years and starting over. A great soulution for going green s investing in Atlanta Colocation.

For Dell and Hewlett-Packard, fighting for sales in a market with some of the tightest profit margins in technology, the numbers are starting to add up. About 25 million shoppers say they would pay more for greener PCs, a Forrester Research study found. And expenses have dropped, with estimates showing it costs just 3 percent more to produce the new PCs.

"This is going to be a deciding factor for customers now," said David Daoud, an analyst at Framingham, Mass.-based IDC who researches green technology.

The Forrester study found 12 percent of the U.S. adult population would pay more for Earth-friendly PCs. Half of businesses surveyed in April say they use environmental impact as a criterion in purchasing decisions, twice as many as in 2007, Cambridge, Mass.-based Forrester said.

The credit crisis and possible economic recession may hamper those intentions. While these PCs lower energy costs and save money, the vendors still have to prove that consumers and corporations will spend the extra money up front.

The PC shift comes as consumers and businesses take steps to be ecologically aware, from replacing plastic grocery bags with reusable ones to replacing the corporate fleet with hybrid cars such as Toyota's Prius. Companies are buying compostable cafeteria utensils and signing contracts to use renewable fuel to power offices and plants.

Dell bills its Studio Hybrid, released in July, as the company's "greenest PC ever." Aimed at consumers and small businesses, the bamboo-clad computer starts at $599. A version with a plastic sleeve, recyclable in some communities with extensive reuse programs, is $100 less.

The price is in the middle of the consumer desktop PCs on Round Rock, Texas-based Dell's Web site, which start at $279. Gone is the boxy design. This desktop is 80 percent smaller and the plastic sleeve comes in colors like Ruby and Quartz.

"Our big epiphany is that you cannot walk away from the principle of appeal," said Ken Musgrave, who leads Dell's research into how customers relate to the feel and appearance of computers. "Unbelievable as it may seem, Dell and chic are being uttered in the same sentence."

The new systems get their biggest electricity savings from low-energy chips, said Richard Doherty, an analyst at Seaford, N.Y.-based technology researcher Envisioneering Group. And Dell says the smaller size gives it another boost.

Musgrave took an old Dell desktop apart recently and shook his head at the wasted space inside. The boxy 16-by-6-by-18-inch machine is now 8.8 inches tall, 3-inches wide and 8.3- inches deep and uses as much as 70 percent less energy.

The boxes, designed to be filled later with more drives and memory, required bigger fans to cool them at their greatest potential use. Consumers rarely used them that way, wasting the electricity.

Green PCs cut energy costs 21 percent a year, by adding a new power supply system that costs $20 more, said Hewlett-Packard's Kirk Godkin, senior product manager for corporate PCs.

A business that buys 2,000 would spend $40,000 more. Each desktop saves $6 to $25 in energy costs annually. Companies that leave computers running around the clock would save $50,000 and recoup their investment the first year, he said.

Still, even with these steps, PCs aren't as Earth-friendly as they could be, Forrester analyst Christopher Mines said.

"HP and Dell are making credible strides, but remember that these guys have PCs to sell this month, this quarter," he said. "The greenest thing the PC companies could do would be to lengthen the lifecycle and warranty of their products, making PCs more upgradeable and modular — so they don't have to be purchased and thrown away so often."

The environmental push also changed PC packaging. Dell's Hybrid comes wrapped in recycled milk jug material, which is itself recyclable. It's easier to stack and mold than more widely used foam packing, packaging chief Oliver Campbell said.

After 20 years, Dell also is reviving the Air Paq, an inflatable plastic cushioning sleeve that laptops slide into for protection during shipping.

The earlier attempt failed when the seals broke, deflating the cushion and damaging products.

Dell has now made the seals strong enough to hold up and used the new Air Paq this summer on 30,000 shipments, Campbell said.

H-P Buys Storage Firm

LeftHand Purchase Heightens Competition With Rival Dell

Hewlett-Packard Co. agreed to buy LeftHand Networks Inc. for $360 million in cash, ramping up competition with rival Dell Inc. in the robust market for low-cost computer storage.

H-P is targeting small and midsize companies expanding their data centers.

LeftHand, based in Boulder, Colo., specializes in storage area networks, which allow users to attach storage devices to a server computer. H-P said the deal should allow it to offer cheaper storage systems and server networks to customers while simplifying the process of installing and managing the systems. LeftHand uses a storage technology called iSCSI, which allows small companies to store large volumes of information less expensively than traditional storage network technology.

In particular, H-P wants to increase sales of discount HP desktops and of colocation storage systems to small and medium-size businesses that are increasing the size of their data centers, which house back-office computers that run corporate functions such as email, said Dave Roberson, H-P's senior vice president of the commercial storage division.

The acquisition comes in a tech area that remains strong despite the economic slowdown and fears of shaky corporate spending. Spending on storage systems, which companies are expanding to accommodate ever-growing volumes of data, increased 17% during the first six months of the year, according to market researcher IDC.

H-P's deal follows a similar move by rival Dell. Last November, Dell paid $1.4 billion to acquire closely-held storage maker EqualLogic, which builds hardware systems that perform a similar function to the LeftHand products.

Lou Miscioscia, an analyst at Cowen and Co., said the LeftHand deal will help H-P counter Dell and refurbished Dell computer sales. While H-P built up its server-computer offerings with the 2002 acquisition of computer maker Compaq Computer Corp., it has lagged in providing storage systems, he noted.

Mr. Roberson said a large percentage of LeftHand sales are already made through H-P, so he expects the integration to run smoothly. Privately-held LeftHand was founded in 1999 and currently has 215 employees.

In May, H-P also announced it purchased technology consulting firm Electronic Data Systems Corp. for $13.25 billion, a deal aimed at building market share with large corporate clients.

By: David Benoit and Justin Scheck
Wall Street Journal; October 2, 2008

Dell Forecasts Soft Demand, but Rivals Are Upbeat

Dell Inc. said Tuesday it is seeing "further softening" in global demand, raising questions about the health of the technology industry and fresh concerns about the computer maker's turnaround efforts. Dell shares tumbled 11%.

The company's finance chief, Brian Gladden, told investors that August, typically a slow month for Dell, was particularly bad this year, and "what's changed is we haven't seen it snap back in September."

But there are signs other large tech companies, including Dell's biggest rival, have so far been better able to weather the economic downturn. On Tuesday, Hewlett-Packard Co. Chief Financial Officer Cathie Lesjak told investors the company is "very confident" it can hit its current quarter profit target. Shares of H-P climbed nearly 7%.

Dell is in the midst of an effort by founder Michael Dell to revamp the Round Rock, Texas, company's business model. The changes, including selling PCs and refurbished Dell notebooks through retail stores, have yet to pay dividends.

"The company's inconsistent performance and lack of confidence means there's a lot of uncertainty in the turnaround," said Bill Kreher, a securities analyst with Edward Jones.

Also Tuesday, John Chambers, the chief executive of Cisco Systems Inc., held to the networking company's long-term revenue growth target, despite the economic slowdown. "We've never been more comfortable with our 12% to 17% growth long-term projection than we are right now," Mr. Chambers said at an analysts' conference.

Despite such positive comments, some analysts worried that the technology sector -- which has so far weathered the economic slowdown -- is now increasingly vulnerable to a deceleration in spending, especially with the collapse of some big clients on Wall Street such as Lehman Brothers Holdings Inc.

Shebly Seyrafi, an analyst at Calyon Securities, estimated both Dell and H-P get about 15% of their revenue from financial companies. But, he added, H-P has more insulation from the financial-services turmoil than Dell, since H-P offers technology-consulting services. Dell, meanwhile, is largely dependent on hardware like PCs and server computers for revenue, and it has often found it necessary to reduce prices -- and therefore profit margins -- to boost sales.

While financial services firms make up just 18% of overall U.S. tech spending, "there will be an impact" on tech companies from the financial sector crisis, said Andrew Bartels, a Forrester Research analyst. Financial firms are projected to cut their tech spending by several percentage points this year, he said, unlike other industries that are still growing their tech spending. On Tuesday, Forrester dropped its forecast for 2009 growth in U.S. tech spending to 6.1% from 9.4%, citing the financial industry turmoil and the slowing economy.

Dell isn't the only firm feeling the pinch. Ingram Micro Inc., which distributes computer products made by companies like H-P and Cisco, said Tuesday it is seeing weakening demand. The Santa Ana, Calif., company cut its third-quarter outlook, saying "economic softness is continuing into September, which is exerting greater pressure on operating margins."

By: Justing Scheck, Ben Worthen, and Pui-Wing Tam
Wall Street Journal; September 17, 2008